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Record of Proceedings

Special Assembly Meeting - FY2026 Budget Discussion and Rate Direction - February 4, 2025

City and Borough Assembly — Tuesday, February 4, 2025
BodySitka, Alaska
SessionCity and Borough Assembly
DateTuesday, February 4, 2025
StatusFILED
Video Record
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Transcript — Verbatim
0:00

Six o'clock is sprung.

0:03

Uh good evening.

0:04

I'd like to call to order the February 4th special assembly meeting.

0:10

Please join me for flag settled.

0:14

I pledge a leader to the flag of the United States of America and to the Republic for which one nation under God is for all the Assembly of the City and Borough of Sitka.

0:33

I would like to respectfully acknowledge the traditional first people of Sheetka.

0:37

With gratitude, we proceed on Klingitani.

0:40

Sarah, roll call, please.

0:45

Mr.

0:45

Pike.

0:47

Here.

0:47

Ms.

0:48

Carlson.

0:49

Here.

0:50

Mr.

0:50

Yestad.

0:51

Here.

0:52

Mr.

0:52

Christensen.

0:53

Here.

0:53

Mr.

0:53

Mosier?

0:54

Here.

0:55

Mr.

0:55

Celine?

0:56

Yes.

0:56

And Mayor Eisenbais is absent.

0:59

Thank you.

1:01

Are there any correspondence or agenda changes this evening?

1:07

Seeing none.

1:09

We will move on to persons to be heard.

1:15

We are persons to be heard for public participation on any item off the agenda, not to exceed three minutes per individual.

1:23

Are there any public comments?

1:32

Seeing none, we'll move on to new business.

1:36

We are new business item A preliminary discussion direction for the FY 2026 municipal budget with focus on the enterprise funds.

1:44

John, would you like to give us an introduction?

1:47

Yes, thank you.

1:49

So another budget meeting in the in the compressed process this year.

1:54

Tonight is uh one that gets a lot of attention on the uh utility and harbor rates uh going through the enterprise funds and uh Melissa has a comprehensive presentation for all of us, and it'll show kind of how we uh uh landed on some of the rate recommendations, and we'll be looking for some guidance from the assembly tonight on what those rates look like, so then we can adjust the revenue side of the model uh as we put the full budget together.

2:16

So, with that, I'll turn it over to Melissa for the presentation.

2:19

Thank you.

2:21

All right, I'm going to start out by just going over the process a bit to remind you of uh how we arrive at the rates that we're proposing tonight and um some of the assumptions behind what is going in to the proposed rates.

2:37

Um so we for all of our our rate payer supported funds.

2:45

Um we come together as a team and we discuss any overall changes from the prior year and any new challenges that were maybe unforeseen the prior year.

2:58

Um we come up with all of the assumptions, make sure everyone is okay with those assumptions, um, and then these all go into our fiscal models that outline our operating and capital expenditures going forward uh between 10 years and upwards of 30 years, depending on the capital plan that we have available for the fund.

3:22

Um, and then the final step is to get assembly guidance on the rates.

3:27

Um, it's very ideal to get the guidance beforehand.

3:30

It takes quite a bit of work to put the revenue projections together, so if we put them together with the right numbers, that's a lot less work for everybody.

3:40

Um so we're still dealing with slightly higher inflation, it's a lot lower, um, but we are still seeing um higher uh inflation in construction, um, particularly around uh certain types of infrastructure, harbor infrastructure is very expensive, and then as is electric.

4:02

Um then staffing, ongoing staffing.

4:06

Um, it's harder to recruit.

4:07

We're certainly doing much better in terms of recruitment, um, but staff are costing more.

4:15

Um we are where possible not proposing new infrastructure.

4:23

Um, so our long-term plan is based on fixing what we have with like assets.

4:32

Of course, there's often if we haven't touched something for 30 years, um, you know, there's a lot of improvements that are now required by law, so that can be more expensive.

4:43

Um then we're also looking to see where we can just get a substantial amount of life out of an asset rather than jumping to a full replacement.

5:00

So I think the harbor system is a good example where we're we're looking to extend the life of those assets.

5:04

I think a recent one was the fisherman's work float, where instead of doing a complete replacement of that asset at over five million dollars, we're doing a much more scaled-down project, but that should buy us 10 years where we can save up and have more working capital available to fund that project.

5:24

We certainly have potential for grant funding.

5:28

Um, again, the grant funding is very expensive for the city to manage, and it's very complicated.

Discussion Breakdown — Share of Meeting
Harbor Operations█████████████████17%
Budget Equity Analysis███████████████15%
Electric Utility Management███████████████15%
Technology and Innovation█████████9%
Tourism████████8%
Public Works███████7%
Public Health██████6%
Procedural█████5%
Water And Wastewater Management█████5%
Summary of Proceedings

Special Assembly Meeting - FY2026 Budget Discussion and Rate Direction - February 4, 2025

The City and Borough of Sitka Assembly held a special meeting on February 4, 2025, from 6:00 PM to 8:30 PM, with six members present (Christianson, Mosher, Ystad, Pike, Carlson, Saline) and Mayor Eisenbeisz absent. The meeting focused on preliminary direction for the FY2026 municipal budget, particularly enterprise fund rates and resource proposals. Municipal Administrator John Leach and Finance Director Melissa Haley presented a comprehensive review of challenges, assumptions, and rate recommendations for electric, water, wastewater, solid waste, and harbor funds. Assembly members also introduced three resource proposals: a full-time refrigerant technician, visitor industry data collection, and a port district study with potential new port director position.

Discussion Items

  • Enterprise Fund Rate Recommendations: Finance Director Melissa Haley presented recommended rate adjustments for FY2026: Electric – 2% increase plus customer fee adjustment (phased); Water – 6% increase; Wastewater – 6% increase; Solid Waste – 2% increase for collections, 4% for transfer station/scrapyard; Harbor – 4% increase. Key drivers included inflation (2.3% Alaska CPI for Dec 2024), unfunded mandates (water filtration, effluent disinfection, FERC requirements), and asset management strategies to extend infrastructure life. The electric fund also discussed a potential USDA RUS loan payoff (over $3 million) using hydroelectric incentive funds, which would not affect rates.

  • Electric Rate Discussion: Assembly members debated the proposed 2% electric increase versus inflation (2.3%). Concerns were raised about future capital needs (40 pole replacements, transmission/distribution upgrades) and emergency preparedness, citing examples from Ketchikan (35% rate increase needed) and Haines (potential 40-70% increase from a transmission line break). Some members advocated for 2.3% or 3% to better match inflation and build reserves. The consensus was to proceed with 2% as presented, with the understanding that the three-year plan includes continued customer fee adjustments and working capital growth.

  • Resource Proposals for Enterprise Funds: Haley highlighted several capital resource proposals: a $22,000 increase in temporary wages for electric civil maintenance (to reduce contract costs), a submersible remotely operated vehicle (ROV) for dam inspections (shared with fire department), a boom pole grab auger digger derrick for pole replacements (estimated to reduce contractor expenses), and increased travel/training for plant operators. The assembly directed staff to include these in the draft budget.

Key Outcomes

  • Rate Direction: The assembly reached consensus to move forward with all recommended rate increases as presented (no formal motion, but clear guidance). The electric fund rate will remain at 2% for FY26, with a three-year outlook.

  • Saline's Refrigerant Technician FTE: Assembly member Saline proposed a new full-time position (~$130,000/year with benefits) to perform HVAC and refrigeration maintenance on city and school facilities (9 heat pump systems, 25-30 individual units). Supporters noted potential cost savings from reducing contracted services and proactive maintenance. Concerns included recruitment difficulty and job classification. The assembly consensus was to advance this proposal into the draft budget for further analysis, with staff to develop job description and cost estimates.

  • Carlson's Visitor Data Collection: Assembly member Carlson proposed $140,000 for a community survey and economic impact study, funded 50/50 from the Visitor Enhancement Fund and Commercial Passenger Vessel Fund. The data would inform tourism management and quality-of-life decisions. Some members expressed fiscal caution given federal grant uncertainty and ballot propositions, but noted the funds are visitor-related. The assembly agreed to include in the draft budget, though implementation may be delayed to the 2026 travel season due to procurement timelines.

  • Ystad's Port District Study: Assembly member Ystad introduced a proposal for $50,000 in consulting fees to explore creating a port district or port authority, consolidating management of harbor, airport, seaplane base, GPIP, and soon-to-be-completed haul-out facility under a port director (new FTE estimated at $220,000/year). Timing aligns with the Harbor Master's upcoming retirement. Staff noted potential efficiencies and reduced workload on the administrator and legal. Assembly consensus was to include the $50,000 study in the draft budget and evaluate the FTE in future years. Concerns about recruitment and salary competitiveness were raised but did not block advancement.

  • Fire Protection Infrastructure Study: The assembly discussed a project charter for a study of water pressure and fire suppression systems at GPIP, to be funded 50/50 by the water fund and GPIP. The study will evaluate non-potable water line options and potable water improvements. This item was added to the draft budget.

Next Steps

  • Draft FY2026 budget to be released February 18, 2025 (delayed from original February 7 target).
  • Next budget meetings scheduled: February 27 (general fund discussion) and March 12.
  • Staff will refine job descriptions, conduct cost analyses, and develop procurement timelines for data collection and consultant services.

Meeting Transcript

Six o'clock is sprung. Uh good evening. I'd like to call to order the February 4th special assembly meeting. Please join me for flag settled. I pledge a leader to the flag of the United States of America and to the Republic for which one nation under God is for all the Assembly of the City and Borough of Sitka. I would like to respectfully acknowledge the traditional first people of Sheetka. With gratitude, we proceed on Klingitani. Sarah, roll call, please. Mr. Pike. Here. Ms. Carlson. Here. Mr. Yestad. Here. Mr. Christensen. Here. Mr. Mosier? Here. Mr. Celine? Yes. And Mayor Eisenbais is absent. Thank you. Are there any correspondence or agenda changes this evening? Seeing none. We will move on to persons to be heard. We are persons to be heard for public participation on any item off the agenda, not to exceed three minutes per individual. Are there any public comments? Seeing none, we'll move on to new business. We are new business item A preliminary discussion direction for the FY 2026 municipal budget with focus on the enterprise funds. John, would you like to give us an introduction? Yes, thank you. So another budget meeting in the in the compressed process this year. Tonight is uh one that gets a lot of attention on the uh utility and harbor rates uh going through the enterprise funds and uh Melissa has a comprehensive presentation for all of us, and it'll show kind of how we uh uh landed on some of the rate recommendations, and we'll be looking for some guidance from the assembly tonight on what those rates look like, so then we can adjust the revenue side of the model uh as we put the full budget together. So, with that, I'll turn it over to Melissa for the presentation. Thank you. All right, I'm going to start out by just going over the process a bit to remind you of uh how we arrive at the rates that we're proposing tonight and um some of the assumptions behind what is going in to the proposed rates. Um so we for all of our our rate payer supported funds. Um we come together as a team and we discuss any overall changes from the prior year and any new challenges that were maybe unforeseen the prior year. Um we come up with all of the assumptions, make sure everyone is okay with those assumptions, um, and then these all go into our fiscal models that outline our operating and capital expenditures going forward uh between 10 years and upwards of 30 years, depending on the capital plan that we have available for the fund. Um, and then the final step is to get assembly guidance on the rates. Um, it's very ideal to get the guidance beforehand. It takes quite a bit of work to put the revenue projections together, so if we put them together with the right numbers, that's a lot less work for everybody. Um so we're still dealing with slightly higher inflation, it's a lot lower, um, but we are still seeing um higher uh inflation in construction, um, particularly around uh certain types of infrastructure, harbor infrastructure is very expensive, and then as is electric. Um then staffing, ongoing staffing.

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